Linda Yueh
- Published in print:
- 2013
- Published Online:
- May 2013
- ISBN:
- 9780199205783
- eISBN:
- 9780191752018
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199205783.003.0007
- Subject:
- Economics and Finance, South and East Asia
The rapid rise of the entrepreneurial private sector in China is one of the key reasons for the success of its transition from a centrally planned economy toward becoming a market-oriented one since ...
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The rapid rise of the entrepreneurial private sector in China is one of the key reasons for the success of its transition from a centrally planned economy toward becoming a market-oriented one since the late 1970s, which was explored in part in the last chapter. At the same time, China is a country known for its incomplete legal system, which includes the lack of an independent judiciary, and adjudication is not free from interference from the executive branch. In addition, there is evidence of financial repression whereby legal and institutional constraints impede the development of financial intermediaries, thereby retarding the development of the financial sector. In China, this is manifested insofar as the rules favour state-owned enterprises (SOEs) despite three decades of reform. SOEs still dominate credit allocation, such that the majority of private small- and medium-sized enterprises (SMEs) obtain no bank financing even in 2006 (Lin 2007). This chapter investigates the impact of lagging financial and legal systems on private sector development and complements the previous one.Less
The rapid rise of the entrepreneurial private sector in China is one of the key reasons for the success of its transition from a centrally planned economy toward becoming a market-oriented one since the late 1970s, which was explored in part in the last chapter. At the same time, China is a country known for its incomplete legal system, which includes the lack of an independent judiciary, and adjudication is not free from interference from the executive branch. In addition, there is evidence of financial repression whereby legal and institutional constraints impede the development of financial intermediaries, thereby retarding the development of the financial sector. In China, this is manifested insofar as the rules favour state-owned enterprises (SOEs) despite three decades of reform. SOEs still dominate credit allocation, such that the majority of private small- and medium-sized enterprises (SMEs) obtain no bank financing even in 2006 (Lin 2007). This chapter investigates the impact of lagging financial and legal systems on private sector development and complements the previous one.
Lalita Som
- Published in print:
- 2022
- Published Online:
- April 2022
- ISBN:
- 9780192849595
- eISBN:
- 9780191944697
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780192849595.003.0004
- Subject:
- Economics and Finance, International
The Chinese State has defended its proactive role by providing not only the capital-intensive investments needed by the private sector to grow but also in creating an entrepreneurial role for itself ...
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The Chinese State has defended its proactive role by providing not only the capital-intensive investments needed by the private sector to grow but also in creating an entrepreneurial role for itself with a bold vision and targeted investment. It has successfully envisaged the risk space in the international markets and has operated effectively within it to facilitate the entry of Chinese private companies. This has amplified the importance of key SOEs in Chinese growth. Yet the large presence of firms which have survived through their political connections especially to local government interests now pose a threat to the State becoming beholden to local interests. The State also runs the risk of becoming a poor imitator of private sector behaviours, because it is unwilling to curb the monopoly privileges given to some SOEs, thus creating entrenched vested interests in continuing State ownership. Deficiencies in China’s market infrastructure continue to prevent the government from fully allowing market forces to run the economy. The government will, therefore, continue to play an important role in China’s transformation.Less
The Chinese State has defended its proactive role by providing not only the capital-intensive investments needed by the private sector to grow but also in creating an entrepreneurial role for itself with a bold vision and targeted investment. It has successfully envisaged the risk space in the international markets and has operated effectively within it to facilitate the entry of Chinese private companies. This has amplified the importance of key SOEs in Chinese growth. Yet the large presence of firms which have survived through their political connections especially to local government interests now pose a threat to the State becoming beholden to local interests. The State also runs the risk of becoming a poor imitator of private sector behaviours, because it is unwilling to curb the monopoly privileges given to some SOEs, thus creating entrenched vested interests in continuing State ownership. Deficiencies in China’s market infrastructure continue to prevent the government from fully allowing market forces to run the economy. The government will, therefore, continue to play an important role in China’s transformation.
